Will other universities follow suit in the age of ESG considerations

The University of California Pension and Endowment funds will divest all fossil fuel assets. That’s because the University of California’s portfolios faced a “long-term risk” from fossil fuel and coal and oil sands. Further, two senior University officials revealed the divestment plans in an opinion piece Tuesday in the LA Times.

Chief Investment Officer Jagdeep Bachher and UC Board of Regents and Investments Committee Chairman Richard Sherman were the authors of the piece.

Fossil fuel assets a financial risk for the University of California

The University of California did not make any new fossil fuel investments from 2014 onwards in line with its policy on climate change.

“We believe hanging on to fossil fuel assets is a financial risk,” the authors wrote. “That’s why we will have made our $13.4-billion endowment “fossil-free” as of the end of this month, and why our $70-billion pension will soon be that way as well.”

The University of California’s adoption of ESG

• 2014 – Bacher and Sherman led the University of California to sign the United Nation’s Principles for Responsible Investing.
• 2015 – The university thereafter created its sustainable investing framework.
• 2018 – Most recently, the University modified its investing policy to include environmental, social, and governance (ESG) in investing decisions.

Not divesting for a headline

The authors say that clean energy will unequivocally fuel the world’s future. Therefore, there is money to be made from these new energy sources.

“We have chosen to invest for a better planet, and reap the financial rewards for UC, rather than simply divest for a headline.”